Howard Dean and the dot com bust

Many people have likened the Dean phenomenon to the dotcom bubble and bust. Here’s one of the best, with some other links. This boom and bust had all the features of the original, particularly a “this-changes-everything” philosophy, where the old metrics were not supposed to work and skepticism was banished. Some otherwise sensible people were willing to jump on the bandwagon.

Let me extend the analogy. After the last dotcom bubble and bust, involving Enron et al, lots of people thought they ought to get their money back. So we had the Sarbanes-Oxley Act of 2002. Now it’s true that in Dean’s case we did not have fraud, or self-dealing, or apparently any other kind of illegality – just gullibility on a massive scale. But the basic point still seems to hold: sometimes markets don’t work because people are stupid, and they need to be protected against themselves.

But instead of passing more laws after the other dotcom bubble, maybe we should have been learning a different lesson –markets do work, eventually. The reason is that in an open society, with free political and economic markets, there are always lots of people who have a strong self-interest in setting the record straight, whether it’s the press, or competitors for capital, or John Kerry.

Now, we wouldn’t think of regulating the political market. Or would we? What about all that campaign finance “reform” that keeps trying to level the playing field but only succeeds in producing new winners and losers? Should we now try to regulate Internet politicking to forestall the next bubble candidacy? No doubt the political parties, which have the most to lose from insurgencies like Dean’s, would like to see that. But our Constitution compels us to think very carefully before making such moves.

Why not the same attitude toward the securities markets? There too we have entrenched parties that, like the political parties, have strong reasons to nip the next new thing before it can show that it’s a suitable replacement for the old thing. Is freedom to innovate in our financial markets as important to protect as freedom in political markets?

And while we're talking about freedom, what about that strange Iowa system, which seems to disregard one-person-one-vote, secret balloting, and many other beliefs about democracy we hold dear. If we're going to let Iowa decide how to help us pick a president, can we not let the states decide lots of other stuff, like how to run a corporation, or who should be able to get married?

Comments

[brayden]

"But instead of passing more laws after the other dotcom bubble, maybe we should have been learning a different lesson –markets do work, eventually."

Sure, eventually, after billions of dollars in financial investment were wasted in doomed business ventures. Maybe some of Dean's supporters would like the time and resources they spent campaigning back.

Nice blog.

[David Slachter]

There may be similarities between the Dean phenomenon and the dotcom bubble. I do not want to debate that issue. However, like the dotcom bubble, the Dean phenomenon is a harbinger of things to come.

The dotcom bubble did not arise in a vacuum. It arose out of excitement for a new way of doing business and a new way of communicating. Likewise, the Dean phenomenon is a demonstration of how to energize and galvanize the grass-roots in a way that would have been considered impossible not too long ago.

Dean may not have been the right guy to lead this parade. However, the rules of the political game will change, particularly regarding fundraising, "spreading the message" and getting people more directly invovled in the political process.

I am a living example of that phenomenon. Had it not been for the Dean campaign, I would not have taken weblogs seriously. I had thought they were simply mindless exercises for kids. Now I know better. The amount of information and intelligent dialogue on these weblogs is astounding.

Just one man's opinion.